Answer Happy

Han Products manufactures 33,000 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.70 10.00 2.30 12.00 $ 28.00 An outside supplier has offered to sell 33,000 units of part 5-6 each year to Hon Products for $22 per part. If Hon Products accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental of $83,000, However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to parts. would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?